By helping landlords cut their rent arrears, thereby limiting repossessions, letting agents may also help minimise void periods and improve housing stability in the private rental sector.
Repossessions are taking longer
Last year, the average time taken for a landlord to repossess a property when applying to the courts was 22 weeks (approximately five months), up from a previous government figure of 16 weeks in previous years.
There were also significant regional variations, with a high of 25 weeks recorded in London and a low of 18 weeks in the South West.
Neil Cobbold, chief operating officer of PayProp UK, says: "There are a variety of different reasons for repossessions taking longer, but if rent arrears are kept under control during a tenancy, this is one way in which the number of repossessions and the time taken to reclaim a property could be kept to a minimum.
Having to go through the repossession process can be long-winded and costly, so it's crucial to avoid having months of outstanding rental payments on your rent roll."
Why is communication so important to reducing arrears?
Tenants in arrears are more likely to take action if they are chased on a regular basis. What's more, if agents and landlords communicate with renters in arrears, they can find out what is causing the non-payment and work together to find a solution such as an affordable monthly payment plan. When it comes to reminding tenants of the money they owe, automated SMS messages and emails are the most effective.
Cobbold explains: "Statistics show that around 90% of text messages are read within three minutes of receipt. Meanwhile, our data shows that 61% of tenants with outstanding payments settle or arrange a solution within 48 hours of being reminded. Automating this process reduces the letting agent's workload and ensures that no-one is forgotten or reminded when they shouldn't be. Agents should no longer be sending letters to chase unpaid rent as it prolongs the process and letters are easier to ignore."
Live reporting can reduce arrears in the future
The PayProp system allows agents to see the live arrears status of tenants and then proactively chase unpaid rent with automated reminders. Managing the process in this way helps agents to keep on top of administration as they can see who they have reminded and when. It is also hugely beneficial in providing agents with a full summary of the debt position of their tenants and therefore greater visibility of their overall business.
Cobbold continues: “Our system provides landlords with owner statements which gives them all the information they need about payments and can help them with their annual tax returns. On top of this, it helps agents to identify the highest-risk tenants to their clients by monitoring what has been paid, how much is owed and by what date. This process means agents can put measures in place for their landlords to reduce arrears likely to occur in the future.”
An important time of year to manage arrears
Cobbold adds that as we move towards Christmas and New Year, it’s a crucial time for letting agents and landlords to keep on top of rental arrears.
He concludes: "Tenants spend more over the festive period, and arrears tend to spike. If agents and their landlords are well prepared and manage arrears effectively, they can reduce the chance of any payment issues spiralling over the next few months."
